No Change To Tax Rules

Source : The Straits Times, Aug 21, 2009

THE Government has decided not to press ahead with a proposed change to the income tax laws to make it clearer to property sellers when they will be taxed on their profits.

Under the proposal, an individual who sells a property would be certain that profit from the sale would not be subject to tax if he had not sold any other property in the preceding four years. --PHOTO: BT

This came after 60 of the 64 comments received on the proposed change gave it the thumbs down.

Under the proposal, an individual who sells a property would be certain that profit from the sale would not be subject to tax if he had not sold any other property in the preceding four years.

But instead of reacting positively after The Straits Times highlighted the proposed change last month, investors viewed it as a back-door attempt to impose a capital gains tax or a pre-emptive strike against property speculators.

This prompted the Finance Ministry to clarify that the proposed change involved no tightening of the current income tax treatment for individuals who sell their properties. It had also noted that over the years, only a small number of individuals - those who regularly buy and sell properties - had been taxed on their gains from such transactions.

In a statement on Friday, the Finance Ministry noted that it had received salient feedback which led to its decision not to press ahead with the proposed change. It had also considered alternatives to give certainties of non-taxation to individuals who sell their properties but noted that these brought 'drawbacks and complexities of their own'.

One respondent, for example, had noted that the proposed tax change 'could bias property purchase decisions towards investing in one bigger property rather than numerous smaller properties. This is because certainty of non-taxation would be provided for disposal of one property within any four years, regardless of the property's value'.

Other respondents said there were many other possible factors which should be take into consideration. These factors include property being held for a very long period but ended up being sold together another property within the same four-year period..

This might lead to 'inadvertent uncertainty' for individuals who sell more than one property within any four years, even though there is no change to the current income tax treatment for such cases.